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The Happiness Metric

May 11, 2012

Countries and companies alike are increasingly equating the well-being of their people with productivity.

By many traditional measures, the United States economy has been getting better for a while now. Gross domestic product (G.D.P.) and personal consumption expenditures have been rising incrementally but steadily for several years; the unemployment rate dropped from 10 percent in October 2009 to 8.3 percent early this year; and the Dow Jones industrial average has nearly doubled since its nadir in March 2009. Yet large swaths of the populace are not feeling any better. Not just the poor and the unemployed, but most of the vast middle class are finding themselves no less stressed, stretched and fearful than they were two years ago. That can’t be chalked up to some sort of perceptual time lag. It seems more likely that, as some contend, we are simply measuring the wrong things.

“I think the disconnect between our measures of national income — which have been growing — and how people feel about their lives is raising interest in broader measures of society’s well-being,” said Alan Krueger, an economist at Princeton and former assistant Treasury secretary.

Among those who have been interested is former President Nicolas Sarkozy of France, who in 2008 created a commission to develop economic metrics that would better reflect the experience of the French people and be more indicative of social progress. The com-mission, which was led by the economists Joseph Stiglitz of Columbia University, Amartya Sen of Harvard and Jean-Paul Fitoussi of the Institut d’Études Politiques de Paris, argued in a detailed and far-reaching 292-page report that “G.D.P., the most widely used measure of economic activity, is useful.” But, it went on, “the time is ripe to shift emphasis from measuring economic production to measuring people’s well-being. Conflating the two can lead to misleading indications about how well off people are and to wrong policy decisions.”

The report went on to assert that because G.D.P. is purely a measure of production, it tends to gauge the quantity of output rather than quality and to indicate current conditions rather than conditions over time, or sustainability. Also, the authors noted, G.D.P. draws little distinction between whether expenditures are for good or bad things. For example, traffic jams may increase G.D.P. by increasing the use of gasoline, but this decreases the quality of the air and the quality of life and doesn’t even contribute to getting people to their destinations.

Well-being, the commission argued, has many dimensions, and public policy should be derived from measures that account not only for income, consumption and wealth, but also for health, education, environmental safety, personal satisfaction inside and outside of work, social connections, a sense of participation in one’s own governance and a sense of personal security. The commission recommended broadening societal measures to include the distribution of wealth as well as nonmarket activities like household labor, parenting, community work and volunteering. It also recommended including subjective gauges of well-being: “cognitive evaluations of one’s life, happiness, satisfaction, positive emotions such as joy and pride, and negative emotions such as pain and worry.”

Many of the views advocated in the commission’s report come under the heading of “happiness economics,” one of the newer branches of the dismal science. Of course, the idea that happiness is important to society is not new. John Locke and Thomas Jefferson famously put the “pursuit of happiness” on equal footing with life and liberty as fundamental rights. Jeremy Bentham and John Stuart Mill’s philosophy of “utilitarianism” asserted that the proper course of action for individuals and societies is the one that maximizes overall happiness. Aristotle argued that happiness is the ultimate purpose of human existence. Happiness economics, however, goes a step further in that it advocates the use of objective and subjective measures of public well-being when formulating and evaluating public policy.

“People’s quality of life is experienced, so we are going to have to get into the realm of actually asking them about that experience rather than just trying to measure it by how many things they have,” said Nic Marks, psychologist, statistician and author of “The Happiness Manifesto.” “We now have statistical methodologies — survey techniques — to do this. There have been great advances in psychological research, and we should be applying these to our public policy.”

A number of policy makers have already taken note. In Britain, Prime Minister David Cameron recently directed the Office for National Statistics to conduct a nationwide survey asking citizens what they believe should be used to measure happiness, with the goal of formulating policy. In Germany, the Bundestag has established a Commission on Growth, Prosperity, Quality of Life to develop a more holistic measure of progress. Similar efforts are under way in Italy, Australia, South Korea, Canada and the United States.

The effort to use happiness as a measure of a society’s productivity on a macro scale is paralleled and bolstered by research on the micro level, which shows that being happy at work actually makes individuals more productive. In a recent study done for Gallup using a longitudinal database of 2,178 business units in 10 large organizations, the researcher James Harter “found evidence supporting the causal impact of employee perceptions on bottom-line measures” like customer loyalty, employee retention, revenue, sales and profit. In a related finding, the Gallup-Healthways well-being index showed earlier this year that Americans of all ages and income levels felt less happy at work and more disengaged from what they do than ever before. Gallup found that this disengagement correlated with lower productivity and poorer health outcomes and cost companies an estimated $300 billion annually.

The Harvard Business School professor Teresa Amabile and the researcher Steven Kramer, co-authors of “The Progress Principle,” also found a causal relationship between happiness and productivity in their research. Over the past decade, using data from daily diary entries of 238 professionals in seven companies, they charted each person’s psychological state and found that it had a profound impact on that worker’s creativity, commitment, collegiality and output.

“Most of us believe that if you achieve success, you will be happier, but that’s backward,” said Shawn Achor, author of “The Happiness Advantage.” “A decade of scientific research shows that happiness fuels success. Your brain, when positive, performs significantly better than when you are negative or stressed. Your intelligence and energy level rise. You are more resilient and more productive.”

If, in short, happiness is both the ultimate goal of productivity and a means to achieve it, then it is not an outlandish notion to suggest that organizations and societies should gauge their success, at least to some extent, by the well-being of their people.